CUK's legal guide to naming a limited company

Why you’re about to name your own company

Service companies are either set up by an individual or purchased off-the-shelf, usually for tax or liability reasons. This means the choice of name can often be the last thing you come to think about. However, the name of the company dictates its appearance in the market: its ‘face.’ Naming a company also raises a number of legal issues that must be considered, both on registration and on changing a pre-registered name, writes David Buckle, head of the employment practice at Cubism Law.

What’s in a company name?

While there are some exceptions, the name of a private limited company must end in "Limited" or "Ltd". In addition, certain characters, punctuation or symbols are also not permitted in a company name and overall, any name must be no more than 160 characters.

When it comes to registering a name, the Registrar of Companies will not register a choice of name if:

  • Its use would constitute a criminal offence
     
  • It is offensive
     
  • It is an inappropriate indication of company type e.g. a limited company calls itself “PLC"
     
  • It is "the same as" a name already registered on the index of company names

The last point above is usually the main concern.  When comparing company names, the Registrar ignores punctuation, the company's status and the word "the" or "www" at the start. Expressions such as "£" and "pound" are also treated as the same.

In addition, the use of certain names requires the prior approval of the Secretary of State and other relevant authorities. These are names that imply a connection between the company and the government or a local/public authority.  Consent from the Secretary of State is further required for the use of certain “sensitive” names, such as expressions that imply a national or international stature such as "British" and "European", those that imply status such as "council" and "society" and those that imply specific functions such as ""insurer" and "banking". When naming a new company with an IT offering, watch out for restrictions on the words ‘Oversight’, ‘Data Protection’ and ‘Prince.’

What can challenge a company name?

Although you may be able to register a name initially without objection, this may not be the end of matter. Challenges to a company name can be made in the following ways:

  • The Secretary of State may, within 12 months of registration, order a company to change its name if it is the same as or is "too like" another registered name. They may also direct a change of name where misleading information has been given for the purposes of registration or the name gives a misleading indication of activities so as to be likely to cause harm to the public.
     
  • Any person may apply to a Company Names Adjudicator if a company's name is the same as a name associated with theirs or where the use of the name is sufficiently similar that it would be likely to mislead. There are defences to these allegations, including that the name was registered before the other company gained its goodwill; substantial start-up costs have been incurred, the name is dormant or the name was registered in the ordinary course of business and the company is available for sale. Even if these circumstances do apply, the objection may still be upheld if the person objecting shows that the main purpose in registering the name was to obtain money or to prevent registering the name.
     
  • The company may be liable in court for “passing off”. This is where a third party can prove that it has goodwill in its name, that the company is misrepresenting itself as that third party and that damage is caused as a result.
     
  • Where the company uses a name, which is the same or similar to a registered trade mark, the owner may be able to bring an action for trade mark infringement. For IT contractors, think “Java”.

To avoid these challenges, checks should be made in advance using internet search engines or domain name registries, the Trade Marks Registry of the UK Intellectual Property Office and even local phone books, to see whether another business is using that name.

What’s in a business name?

A “business name” is a name used by any person, partnership or company for carrying on business which is not the same as their own name (e.g. X Limited trading as Y).

As above, certain business names require the approval of the Secretary of State before they can be used.  These include names connected with HM Government or a local authority. Again, as above, the Secretary of State’s approval is required for other sensitive words or expressions. As previously stated, business names should not include indicators of legal status to which they are not entitled (e.g. “PLC” where the company is “limited”).

Despite these limitations, the rules concerning "too like" and "same as" names do not apply to business names. Having said this, the law prohibits the use of business names which are misleading about the nature of the business's activities and are likely to cause harm to the public.

As with company names, when choosing a business name, checks should be made in internet search engines, domain name registries, local phone books, relevant trade journals or magazines, and trademarks registry to see if any other business is already using the name. However, there is no central register of business names and no requirement to register a business name.

What about changing names?

If you buy a company off-the-shelf, it will usually have a name that does not fit its purpose. You should consider the guidance so far when creating the new name. When changing a company name, this can be done by any of the following methods:

  • By special resolution. Various forms need to be filed at Companies House depending on what procedure is used for changing the name (NM01 to NM06).
     
  • Through the company's articles of association.
     
  • By directors' resolution acting after the Secretary of State has directed a change of name.
     
  • When the Company Names Adjudicator requires a new name.
     
  • When the Court orders a new name following an appeal against the Company Names Adjudicator.
     
  • On the restoration of a company to the register.

The change of name is effective from the date on which a new certificate of incorporation is issued. Once the change of name becomes effective, you will need to ensure that your stationery and websites, among other items, are updated in order to comply with the disclosure requirements.

In summary, check before you use a name and employ some common sense. Britain PLC Limited trading as “Coca-Cola Java specialists with Royal IT Council approval” is unlikely to get through.

Wednesday 2nd March 2011